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The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand

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Author Info

  • David Law
  • Nathan McLellan

    ()
    (New Zealand Treasury)

Abstract

This paper evaluates the contributions from firm entry, exit and continuation to labour productivity growth in New Zealand over the period 1995 to 2003. Decomposition techniques developed by Griliches and Regev (1995) and by Foster, Haltiwanger and Krizan (1998) are employed. Results suggest significant heterogeneity across both industries and firms. Most entering firms’ initial level of labour productivity is below the industry average but grows rapidly thereafter. Continuing firms generally add to industry labour productivity growth. On average exiting firms experience stagnant or declining labour productivity in the years leading up to their death, and when they eventually die most have below average labour productivity compared to their industry. This pattern persists even at a highly disaggregated industry level and indicates that firm turnover has positively contributed to labour productivity growth in New Zealand.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2005/05-01/twp05-01.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 05/01.

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Length: 34 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:nzt:nztwps:05/01

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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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Related research

Keywords: Firm Performance; Entry; Exit; Turnover; Mobility; Labour Productivity; New Zealand;

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References

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  1. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  2. Stefano Scarpetta & Philip Hemmings & Thierry Tressel & Jaejoon Woo, 2002. "The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data," OECD Economics Department Working Papers 329, OECD Publishing.
  3. Klapper, Leora & Laeven, Luc & Rajan, Raghuram G, 2004. "Business Environment and Firm Entry: Evidence from International Data," CEPR Discussion Papers 4366, C.E.P.R. Discussion Papers.
  4. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth. Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
  5. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
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Citations

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Cited by:
  1. Borland, Jeff, 2005. "Impacts of Employment Regulation: Towards an Evaluation Framework," Occasional Papers 06/7, Ministry of Economic Development, New Zealand.
  2. Fabling, Richard & Grimes, Arthur & Sanderson , Lynda & Stevens, Philip, 2008. "Some Rise by Sin, and Some by Virtue Fall: Firm Dynamics, Market Structure and Performance," Occasional Papers 08/1, Ministry of Economic Development, New Zealand.
  3. Fabling, Richard, 2007. "Just How Innovative are New Zealand Firms? Quantifying & Relating Organisational and Marketing Innovation to Traditional Science & Technology Indicators," Occasional Papers 07/4, Ministry of Economic Development, New Zealand.
  4. Greene, Francis, 2012. "Should the focus of publicly provided small business assistance be on start-ups or growth businesses?," Occasional Papers 12/2, Ministry of Economic Development, New Zealand.
  5. David Law & Bob Buckle & Dean Hyslop, 2006. "Toward a Model of Firm Productivity Dynamics," Treasury Working Paper Series 06/11, New Zealand Treasury.

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